Sat | Dec 15, 2018

Mark Ricketts | Public policy without money is costly

Published:Sunday | October 14, 2018 | 12:00 AM
Peter Phillips, the opposition leader.

This is Part Two of a two-part series. Last week's article was mistakenly published with Mark Wignall's logo.

Jamaica produces no capital goods, much of the raw materials needed for manufacturing are imported, and almost every agricultural product we currently grow or produce is far less than our output was in 1962.

Yet the speech of our opposition leader at his party's annual conference was about social revolution. Not a productivity revolution, not an economics revolution, not a growth revolution, not a technology revolution, not a production revolution, but a social revolution. Presumably, that will spur agricultural output, help us produce capital goods, accelerate tourism earnings, and improve our extremely low value-added in production.

Over the last five decades, the Jamaican dollar has nosedived and we have a bloated national debt. Why? The consequences of well-intentioned programmes that were inadequately funded and not properly evaluated. There was also the reality of political promises pandering to the population that were adopted and implemented. The country has paid dearly. Inflated public policy without adequate funding or a proper ordering of priorities is very costly.

 

No money

 

The PNP's social revolution encompassing land reform, first-in-family university scholarships, mobilisation, and community development, at the scale being envisaged, can't live up to expectations. The money required is simply not there.

Because of space limitations, I will look at land reform and education this week and deal with mobilisation and community development in the near future.

The PNP has always struggled with the concept of land reform, some seeing it as a way to reorder the system away from land barons and capitalists to ownership and control by the people. The more moderate view it as an ideal vehicle to redistribute more land to small farmers while accelerating the process of occupants getting a registered title (titling).

The intellectual Left romanticised the idea of divvying up large tracts of land to foster equity and secure social justice while improving opportunities for the masses.

Party founder Norman Manley advocated limiting land ownership to 500 acres and compulsorily acquiring idle lands over 100 acres. Even amid the fascination with smaller acreage and wider ownership distribution, agriculture underperformed. Manley was very disappointed.

For decades, the PNP has been hammering that Jamaica's problems are rooted in the negative spinoffs from the unequal distribution of land that has existed from 1838. The PNP led the government for 40 years, and like its rival, the JLP, could have influenced outcomes, yet captured land, illegal settlements, and owners without registered title are widespread.

Major land reform is an uphill battle, and it is a tedious process that requires a lot of money. If the majority of owners on an estimated 354,900 parcels of land without a registered title (not including captured land and illegal settlements) do not have the money to obtain a title, then a PNP government will have to fund it to make a social revolution plausible.

A family occupying a parcel of land in rural Jamaica needing a registered title gets a drawing of the property indicating its location from Land Val. The family invariably secures the services of GeoLamp, or the Land Administration and Management Programme (LAMP), depending on which parish the property is located. The reason for securing these services is because the process is time-consuming and difficult to work through for the average person without professional help, and legal services can be expensive.

 

History of the land

 

Proof of ownership has to be established. Two persons who are not relatives and over 50 years old have to vouch for the veracity of the occupants' claims. These persons must know the history of the land over the last 30 years. Land surveyors have to be commissioned as a survey diagram is mandatory. If the land is overgrown, it must be cleared and any outstanding taxes paid. Also required are stamp duties, recording fees, and transfer tax.

Upfront costs can be $200,000, $500,000, or more, depending on the size of the parcel, its accessibility, longevity of persons living on the land, and taxes outstanding. If subdivision is involved, the numbers escalate.

With a lot of national digital mapping left to be done, with hundreds of thousands of parcels without registered titles, land reform, consistent with Phillips' magnanimous promise, would blow every budget.

It has cost government billions since the turn of this century whenever a concerted push at land reform occurs. These costs arise from government subsidising legal and surveying costs and foregoing stamp duties and transfer taxes, yet the pace of land reform has been modest.

This does not mean that land reform is not important, but it should be undertaken by the portfolio minister for the National Land Agency and the Titles Office. Phillips overpromising to justify a social revolution is not the answer. Archaic laws and resource constraints slow the process.

On education, he couldn't really be making a case about first-in-family university scholarship as part of his social revolution. Taxpayers are already giving enough. To understand why I say this, bear with me as I look at grants and loans.

 

Grants provided

 

Government and universities provide subsidies and grants to students who are badly in need, but also to students whose families might be earning more than the average taxpayer. These are not loans, they don't have to be repaid.

In some faculties with huge annual fees, individual students receive millions in financial aid each year. Many of our graduates migrate, so a lot of our grants and subsidies go by the way, unless, of course, graduates return or send remittances home.

As it is, taxpayers indirectly provide grants and subsidies to assist students, students get an internationally marketable skill, but there is no assurance that the country will benefit from a return on its investment.

A recent auditor general report reveals that the Students' Loan Bureau (SLB) has just written off $2.5 billion in non-performing and non-collectible loans. As a percentage of total loans being repaid, non-performing loans climbed from 33% to 58% during the last five years.

Even more disturbing is the trend line in delinquencies. In January 2016, 62%, or $2.75 billion, of loans due for initial payment became non-performing within a year. For the past financial year, the SLB debt collectors took in a mere $932 million from debts of $7.95 billion outstanding for more than a year. Even the guarantor system is performing below expectations.

Government is currently footing the bulk of these loans, but Phillips says the taxpayers must give more.

No, Dr Phillips, with non-performing loans being 58% among our brightest and best, it is not a social revolution that is needed. It is a revolution of personal initiative and responsibility, a revolution in accountability and limited excuses, and a revolution in education.

- Mark Ricketts is an economist, author, and lecturer. Email feedback to columns@gleanerjm.com and rckttsmrk@yahoo.com.